GBP/USD looks bullish just below 1.3600

GBP/USD maintains its constructive stance in place in the latter part of Thursday’s session, hovering just below 1.3600 the figure on the back of heightened losses in the Greenback. In the meantime, investors continue to pencil in two potential rate cuts by the Fed for the remainder of the year.

GBP/USD Technical Overview

The Relative Strength Index (RSI) indicator on the 4-hour chart declined below 40 and GBP/USD closed the last 4-hour candle well below 20-period and the 50-period Simple Moving Averages (SMA), pointing to a buildup of bearish momentum.

GBP/USD faces a pivot level at 1.3500, where the 100-period SMA is located. In case the pair confirms this level as resistance, 1.3400 (200-period SMA) could be seen as next support before 1.3360 (lower limit of the ascending channel). Looking north, resistances could be spotted at 1.3540-1.3550 (20-period SMA, 50-period SMA) and 1.3600 (mid-point of the ascending channel, static level).

Fundamental Overview

The disappointing labor market data from the UK, which highlighted an uptick in the Unemployment Rate alongside softer-than-expected wage inflation figures, revived expectations for the Bank of England (BoE) to cut rates multiple times this year and weighed on Pound Sterling. Reaffirming this view, a large majority of 59 economists that took part in a recently conducted Reuters poll noted that they see the BoE cutting the policy by 25 basis points (bps) in the third quarter and the fourth quarter, bringing down the bank rate to 3.75% from 4.25%, where it currently stands.

In the second half of the day, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for May. Investors forecast the core CPI, which excludes volatile food and energy prices, to rise 0.3% on a monthly basis.

A stronger-than-projected increase in this data could feed into expectations for a single rate Federal Reserve (Fed) rate cut in 2025. In this scenario, market participants could position themselves for a diverging BoE-Fed policy, causing GBP/USD to extend its slide. Conversely, a soft monthly core CPI print could hurt the USD with the immediate reaction and allow GBP/USD to erase a portion of Tuesday's losses.

The CME FedWatch Tool currently shows that markets are pricing in about a 40% probability that the Fed will cut the policy rate once or none at all.